CLIENT ALERT: New Laws Affect Judgment Liens

August 10, 2016

One of a judgment creditor’s most important tools is the judgment lien, which is a lien on non-exempt real property owned by the judgment debtor. Placing a judgment lien is simple. The creditor must merely record the judgment and a statutorily required information statement in any county where it wishes to place the lien. But a recent change in Arizona law imposes significant consequences for failure to follow that procedure. As of August 6, 2016, failure to record the information statement will prevent a judgment lien from taking effect, according to a recent change to Arizona law. Read the statute here.

Until now, the consequences have been limited for judgment creditors who did not file the information statement. Under the Arizona Supreme Court’s 2015 decision in Lewis v. Debord (2015), failure to file did not invalidate the lien. It merely caused the lien to lose priority against competing creditors who record liens before the information statement is filed. Likewise, failure to file did not affect judgment creditors’ rights against subsequent purchasers. So judgment creditors who forgot to file an information statement remained free to exercise their lien, subject only to possible limitations on priority.

With the new changes to the statute, the consequences for failing to file an information statement are severe. Because they have no lien, creditors cannot foreclose. If the judgment debtor filed for bankruptcy, the judgment creditor would merely be an unsecured creditor. And the judgment creditor would likely have no recourse against subsequent purchasers. There may be other consequences that would apply in specific cases.

The message for current and future judgment creditors is clear.Make sure that when you record your judgment, you file the required information statement. You should also consider reviewing previously recorded judgments to ensure that they are accompanied by an information statement, as the new statutory language appears to apply to all judgments that require the payment of money and are recorded after January 1, 1997.

Preparing the information statement is a minimal burden. The statement is merely required to set forth: (1) the judgment debtor’s last known address and address it which it received service of the summons; (2) the judgment creditor’s name and address; (3) the amount of the judgment as entered or most recently renewed; (4) the judgment debtor’s social security number (if provided voluntarily to the judgment creditor by the judgment debtor), date of birth, and driver license number; and (5) whether a stay of enforcement has been ordered and the date the stay expires. If any of this information is unknown or unavailable to the judgment creditor or its attorney, the information statement shall say so.

If you want to ensure that you’re following the new requirements in accordance with the new statute or need to review judgments filed previously, our team in Arizona is standing by to help. Contact Justin Henderson in Phoenix for assistance.